Economic Development
3
After a pause in growth during 1985, the Hong
Kong economy rebounded sharply during 1986. Domestic
exports, in particular, staged a strong recovery and grew
by 16% during the year. Both the unemployment rate and
the rate of inflation remain low. The growth rate of the
gross domestic product (GDP) in 1986 was just under 9% and
is forecast to be about 6% in 1987.
The depreciation of the US dollar, and hence of
the Hong Kong dollar due to the linked exchange rate
system, since March 1985 has helped the domestic export
performance, through improving the export competitiveness.
of Hong Kong's products. Domestic exports and re-exports
to China, however, continue to be affected by that
country's efforts to conserve foreign exchange.
Except for a few years, external demand has been
the principal source of growth in the economy during the
past decade, and Hong Kong has adjusted well to changing
conditions in the world markets. The dependence of the
economy on the external sector is well illustrated by the
significant increase in the ratio of total visible trade
to the GDP, from 136% in 1975 (already large by
international standards) to 176% in 1985. At the same
time, there was a shift in the composition of visible